(Bloomberg) — The stock market failed to hold on to earlier gains as big banks fell ahead of the start of the earnings season, with traders also wading through inflation data and Fedspeak for clues on the central bank’s next steps.
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Financial shares dropped the most in the S&P 500, with investors getting ready to scrutinize first-quarter results from JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc — just as prospects of imminent interest-rate cuts dim. Stocks rose earlier Thursday after data showed the producer price index trailed estimates. Treasuries were mixed, with shorter maturities outperforming longer ones.
“The next challenge is earnings season, with the reaction to news likely to pave the path forward for equities,” said Mark Hackett at Nationwide.
The euro wavered after the European Central Bank held interest rates steady for a fifth meeting, while sending its clearest signal yet that cooling inflation will soon allow it to commence cuts.
Several categories in the PPI report that are used to inform the Fed’s preferred inflation measure — the personal consumption expenditures price gauge — such as health care and portfolio management, came in softer.
While the latest PPI reading was constructive, investors should be prepared for fewer rate cuts this year — one or two — and for a first potential move not until the July meeting, according to Larry Tentarelli at Blue Chip Daily Trend Report.
“Although we understand the relief with which this report will be received, there is nothing very encouraging contained within it — and the best that can be said is that there was ‘no new bad news’ either,” said Michael Shaoul at Marketfield Asset Management.
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Federal Reserve Bank of New York President John Williams said the central bank has made “tremendous progress” toward better balance on its inflation and employment goals, but added there’s no need to cut in the “very near term.”
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